Global Africa: Presence or Profitability?

Following the ultimatum that Nigerian banks shore up their capital base if they are to remain in business, several banks have indeed gone over board with each one raising capital in excess of $1billion. Their aim in the long run, having been rescued from the shackles of being a bank in a developing nation, is to become a mega bank with global presence.

With large purses and an increased appetite for international trade and global financing, banks started to look for routes to invest these funds. Routes that will guarantee maximum returns on investment and create a true global presence. It became inadequate to have a good branch network within Nigeria, to remain a Mega bank with enough clout; the bank had to have presence in other countries asides Nigeria.

Early entrants within the banking industry controlled about 60% of the market share and had well established network within Nigeria and most importantly the United Kingdom. This branch network was necessary to help facilitate their international trade. The focus was never on the African axis as these banks were barely able to meet up with customer and service demands in their own home country.

With the consolidation exercise and the creation of bigger bank who have energetic, young and adventurous CEO’s at the helm of affairs, the banking industry was about to witness a phenomenal change. Emphasis was removed from merely being a Nigerian bank offering financial services; it became the case of meeting up with international best practice. Ideas started to flow. It became easy enough since these ideas were backed with the required purchasing power. The banking industry witnessed a significant evolution that changed the face of banking in Nigeria. Top of the range technology was deployed, service standards improve and international trade began to boom. Foreign investors realizing that the return on investment in Nigeria was high began to invest huge sums of money into the banking industry. Hedge funds, public offers, private placements offered excellent investment opportunities for these FDI’s.

Being armed with enough capital and having fully conquered the Nigerian markets, it was time to conquer the African markets. Global Africa was next on the agenda. Which bank was going to be the first to have adequate branch network in Africa. It was time to contest with the likes of Standard chartered Bank in the fight for the African business. After all, there was human capital, technology and the cash to be deployed to the rest of Africa.

The first country to witness the advent of Nigerian Banks become global was Ghana. With loose demands from their Central bank in setting up a financial institution, it was easy to open up branches in Ghana. Now, the whole of West Africa is having a taste of Nigerian banks. The issue is no longer which country to go to; the issue now is “we hope we won’t be the last bank to open up a branch there”

Now the frenzy is on. This brings me to my question. Global Africa is it all about creating a global presence or is it about creating investments that has a higher rate of return? With loose laws and minimum requirements to establish financial institutions in most African countries, creating a chain of banks in Africa has become an easy feat to achieve. Knowing how aggressive bankers are in Nigeria, they are not about to let this opportunity go without thoroughly maximizing it.

Having gone through the rudiments of starting up a new bank in other African countries, the acquisition of banking license, the acquirement of physical and human capital, It becomes obvious that Nigerian banks have more in sight than the mere returns on their investment. The question really is, if all these resources were to be deployed in the setting up a new branch in a viable area in Nigeria, would it achieve a higher rate or return on investment than that of a new deployment in Nigerian’s neighboring countries?